{"id":66115,"date":"2025-10-02T10:57:42","date_gmt":"2025-10-02T05:27:42","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=66115"},"modified":"2025-10-03T11:01:12","modified_gmt":"2025-10-03T05:31:12","slug":"rbis-reforms-towards-internationalising-the-rupee-and-deepening-financial-markets","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/rbis-reforms-towards-internationalising-the-rupee-and-deepening-financial-markets\/","title":{"rendered":"RBI\u2019s Reforms &#8211; Towards Internationalising the Rupee and Deepening Financial Markets"},"content":{"rendered":"<h2 style=\"text-align: justify;\"><b>RBI\u2019s Reforms Latest News<\/b><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">At a time when India faces <\/span><b>rising trade frictions with the US<\/b><span style=\"font-weight: 400;\"> and heightened <\/span><b>global debate on alternatives to the dollar<\/b><span style=\"font-weight: 400;\">, the Reserve Bank of India (RBI) has announced significant measures.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">These aims to <\/span><b>strengthen financial markets<\/b><span style=\"font-weight: 400;\">, boost corporate financing options, and take concrete steps towards internationalising the rupee.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><b>Key Announcements by the RBI<\/b><\/h2>\n<ul>\n<li><b>Monetary policy decisions: <\/b><span style=\"font-weight: 400;\">The RBI kept the <\/span><b>repo rate unchanged<\/b><span style=\"font-weight: 400;\"> at 5.5% and monetary policy stance \u2018<\/span><b>neutral<\/b><span style=\"font-weight: 400;\">\u2019.<\/span><\/li>\n<li><b>Expanding role of banks in corporate consolidation:<\/b>\n<ul>\n<li><b>Takeover financing:<\/b><span style=\"font-weight: 400;\"> Banks allowed to finance corporate acquisitions, previously restricted due to risk concerns.<\/span><\/li>\n<li><b>Impact<\/b><span style=\"font-weight: 400;\">: Opens a structured, low-cost financing channel for mergers and acquisitions, enhancing competitiveness and capital expenditure.<\/span><\/li>\n<li><b>Safeguards<\/b><span style=\"font-weight: 400;\">: Risk-control measures to ensure funds are used productively.<\/span><\/li>\n<li><b>Relevance<\/b><span style=\"font-weight: 400;\">: Aligns with Insolvency and Bankruptcy Code (<\/span><b>IBC<\/b><span style=\"font-weight: 400;\">) framework and helps <\/span><b>corporates consolidate faster.<\/b><\/li>\n<\/ul>\n<\/li>\n<li><b>Rupee internationalisation measures:<\/b>\n<ul>\n<li><b>Cross-border lending in rupees<\/b><span style=\"font-weight: 400;\">: Indian banks and their overseas arms are allowed to lend in rupees to residents or institutions in neighbouring countries (Nepal, Bhutan, Sri Lanka).<\/span><\/li>\n<li><b>Objective<\/b><span style=\"font-weight: 400;\">: Reduce dollar dependence, strengthen regional financial influence, and build confidence in rupee stability.<\/span><\/li>\n<li><b>Geopolitical context:<\/b><span style=\"font-weight: 400;\"> Comes amid <\/span><b>US threats against BRICS currency initiatives<\/b><span style=\"font-weight: 400;\"> and global debates on dollar dominance.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b>Boosting market depth and liquidity:<\/b>\n<ul>\n<li><b>IPO financing:<\/b><span style=\"font-weight: 400;\"> The RBI proposed <\/span><b>increasing the lending limit<\/b><span style=\"font-weight: 400;\"> for IPO financing to Rs 25 lakh from Rs 10 lakh.<\/span><\/li>\n<li><b>Loan against shares<\/b><span style=\"font-weight: 400;\">: It also raised the limit on loan against shares to Rs 1 crore from Rs 20 lakh (last revised in 1998).<\/span><\/li>\n<li><b>Loan against listed debt<\/b><span style=\"font-weight: 400;\">: Ceiling removed to promote bond market activity.<\/span><\/li>\n<li><b>SRVA surplus use:<\/b><span style=\"font-weight: 400;\"> Surplus balances in Special Rupee Vostro Accounts (SRVAs) can now be invested in corporate bonds and commercial papers, enhancing liquidity.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b>Expanding forex benchmarking:<\/b>\n<ul>\n<li><b>Expanding the list of currencies<\/b><span style=\"font-weight: 400;\">: Benchmarked by the Financial Benchmarks India Limited (FBIL), adding more currencies beyond USD, Euro, Pound, Yen.<\/span><\/li>\n<li><b>Significance<\/b><span style=\"font-weight: 400;\">: Reduces inefficiencies of dollar routing, deepens rupee market, strengthens rupee as a trading and settlement currency.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b>Relaxation of large borrower lending framework:<\/b>\n<ul>\n<li><b>2016 restrictions scrapped<\/b><span style=\"font-weight: 400;\">: Banks can lend more freely to large corporates with exposures above \u20b910,000 crore.<\/span><\/li>\n<li><b>Risk management<\/b><span style=\"font-weight: 400;\">: Individual bank risks addressed under the Large Exposure Framework; system-wide risks to be managed with macro-prudential tools.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><b>Broader Implications of the Latest RBI\u2019s Reforms<\/b><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Corporate sector<\/b><span style=\"font-weight: 400;\">: Access to structured takeover financing strengthens India Inc.\u2019s competitiveness.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Banking sector<\/b><span style=\"font-weight: 400;\">: Greater role in corporate growth stories, diversification of loan books, and higher returns.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Financial markets<\/b><span style=\"font-weight: 400;\">: Deeper IPO financing, bond market growth, and improved liquidity.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Regional economy<\/b><span style=\"font-weight: 400;\">: Moves to <\/span><b>internationalise the rupee<\/b><span style=\"font-weight: 400;\"> enhance India\u2019s financial influence in South Asia.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Geopolitics<\/b><span style=\"font-weight: 400;\">: Strategic push for rupee amid US dollar dominance debates and BRICS alternative currency discourse.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><b>Way Forward<\/b><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Strengthen risk management<\/b><span style=\"font-weight: 400;\">: Ensure safeguards against reckless corporate borrowing and asset bubbles.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Promote regional adoption of rupee<\/b><span style=\"font-weight: 400;\">: Expand bilateral and multilateral trade settlements in rupee.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Boost investor confidence<\/b><span style=\"font-weight: 400;\">: Deepen corporate bond markets and ensure transparency in forex benchmarks.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Gradual integration<\/b><span style=\"font-weight: 400;\">: Move cautiously to avoid external shocks while pushing rupee internationalisation.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><b>Conclusion<\/b><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The RBI\u2019s latest reforms mark <\/span><b>a decisive shift<\/b><span style=\"font-weight: 400;\"> from a conservative, inward-looking financial system to one aspiring for regional dominance and global relevance, signalling confidence in <\/span><b>India\u2019s economic resilience<\/b><span style=\"font-weight: 400;\">.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">These reforms carry risks but reflect a larger ambition: to make the rupee travel beyond borders and empower Indian corporates to expand their global footprint, thereby <\/span><b>strengthening India\u2019s financial sovereignty in an evolving multipolar world<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><b>Source: <\/b><a href=\"https:\/\/indianexpress.com\/article\/business\/rbi-allows-banks-to-fund-mas-lend-in-rupee-to-residents-of-indias-neighbours-10283012\/#:~:text=It%20has%20decided%20to%20allow,and%20settlement%20in%20the%20region.\" target=\"_blank\" rel=\"nofollow noopener\"><b>IE<\/b><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The RBI has announced significant measures to strengthen financial markets, boost corporate financing options, and take concrete steps towards internationalising the rupee.<\/p>\n","protected":false},"author":19,"featured_media":66187,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[3026],"class_list":{"0":"post-66115","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"tag-rbis-reforms","9":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/66115","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/19"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=66115"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/66115\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/66187"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=66115"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=66115"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=66115"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}